Out of Pocket Maximum: Important Benefit
If you’re having trouble deciding on a health plan, consider one key feature that is common between plans but is easy to overlook. This feature is known as the Out of Pocket Maximum. A maximum out of pocket is perhaps the most important benefit on a health insurance plan, because it prevents someone from being stuck with a ridiculously large medical bill.
What is Out of Pocket Maximum?
Generally, an out-of-pocket maximum is the most you would pay for any combination of covered medical services in a calendar year. On some plans, certain benefits are not subject to the out-of-pocket maximum, so be aware of possible exceptions.
Depending on the particular policy you are on, the maximum out of pocket may or may not be in addition to the deductible amount. If the annual out-of-pocket maximum includes the deductible, then, it is your grand total expense; you don’t pay anything more for medical services once the annual out of pocket amount is reached. In cases where the policy is designed such that the out of pocket maximum does not include the deductible, then, your total out of pocket insurance would be the deductible amount plus the maximum-out-of-pocket. Below is an example to help clarify.
Maximum Out of Pocket Example
Here is an example of how the maximum out of pocket would work. Let’s say that someone ended up in the hospital for an extended stay and accumulated a hospital bill of $100,000. If they were on a policy that had a deductible of $3,000 and a maximum out-of-pocket of $6000, the most that the patient would pay is:
- $6,000 if the out-of-pocket maximum includes the deductible.
- $9,000 if the out of pocket maximum does not include the deductible.
Does it make sense to have a high out-of-pocket maximum?
At this point, you might be wondering if it makes sense to carry health insurance, much less have a policy with a high maximum out-of-pocket. The answer is ‘yes’ and ‘maybe’! Notice in the example scenarios above that the beauty of having health insurance is that it would protect the patient from paying hundreds of thousands of dollars. With regards to having a high health insurance out of pocket maximum: whether or not it’s a good idea depends on your health and financial status. If you have a medical condition that tends to be costly to care for, then, having a high annual out of pocket maximum might not make sense for you. However, if you are in fairly good health or your finances are pretty stable, then, it might make sense to have a high maximum. Consult with your insurance representative to find out what’s best for your personal situation. Below, you’ll see how a maximum out-of-pocket affects your monthly premium.
How an Out-of- Pocket Maximum Relates to Deductibles and Premiums
- Monthly Premiums
There’s a direct relationship between premiums and maximum out of pocket amounts. Usually, the higher the out of pocket insurance is, the lower the monthly premium will be. Conversely, policies with lower annual out of pocket amounts are generally higher-priced. It’s a trade-off.
- Health Insurance Deductibles
A deductible is the total amount you would pay for medical services before the insurance kicks in. Not all health plans carry a deductible, but an increasing number of policies do. Also, on some deductible plans, office visits, prescriptions, and other selected services may not be subject to a deductible; you would pay discounted copays right away. Whether the plan carries a deductible or not, and regardless of which services are affected by a deductible, the most that you will pay for covered services will not exceed the out of pocket maximum on your policy.
Maximum Out of Pocket in Catastrophic Medical Situation
Oftentimes, the maximum out of pocket feature of a health plan becomes very important when there is a catastrophic medical situation. If someone without health insurance required hospitalization for weeks or even days, they could end up with an astronomical medical bill. Someone that has health insurance, however, would only be responsible for expenses up to the out-of-pocket maximum amount on their particular plan.